Disability insurance is like insurance for your paycheck. If you become disabled and can no longer work at your job, your disability insurance company will pay you benefits that roughly match up to your take-home pay.

Disability insurance may cover everything from total disability to rehabilitation and even the short period after you recover from your disability. Some policies also offer partial disability coverage and coverage for disabilities so severe that the disability insurance company presumes you won’t ever recover.

While virtually every type of illness or accidental injury is covered by disability insurance, some non-illness or injury conditions could be covered as well, such as pregnancy and childbirth. And when something is excluded from coverage, such as certain pre-existing conditions or dangerous situations, your policy will make it as clear as possible so there’s no mystery or confusion.

Coverage for total disability

When you think of disability insurance, you’re probably thinking of coverage for total disability. Total disability coverage means you’ve become injured or ill and lose your ability to earn income. Your disability insurance will pay you benefits each month until you recover or your coverage expires, which should help pay the bills and maintain your standard of living.

Make sure you’re getting enough coverage. Your monthly benefit amount should be about 60% of your pre-tax income, or roughly equal your take-home pay. You may be able to purchase more coverage as needed or add a rider to cover increases in the cost of living.

Total disability means being unable to continue working at your job, but make sure your policy’s definition of disability is own-occupation. An own-occupation policy means you only have to be so disabled that you can’t work for the job you had at the time of your disability.

The alternative, an any-occupation policy, means you have to be too disabled to do any job, which could make it difficult for some people with serious medical conditions to qualify.

Presumptive disability

Presumptive disability coverage is for when you suffer an injury or sickness so debilitating that the disability insurance company presumes that you’ll never be able to return to work.

Such disabilities include the permanent loss of:

Use of both hands, both feet, or one hand and one foot

Speech

Hearing in both ears

Sight in both eyes

Under most disability insurance coverage, you’ll have to wait out an elimination period of around 90 days before the disability insurance company will pay benefits, which allows time for you to recover from your disability and return to work. Because of the nature of the loss, there is no elimination period for presumptive disability.

If you’re concerned that your expected monthly benefits are too low to cover a presumptive disability, you can purchase a catastrophic disability rider. This rider increases your monthly benefit amount if you qualify for presumptive disability coverage, or need near-constant assistance for physical activity, or have a severe cognitive impairment.

Partial disability benefits

Partial disability coverage means you can still go to work, but that your disability has resulted in a partial loss of income, duties, time. If your disability insurance covers partial disability, you’ll have to show that a doctor is treating you until you can no longer benefit from medical care.

With partial disability insurance benefits, your monthly payments could be reduced by the percentage of loss you suffered to your income, duties, or time. But other insurers may pay you your full monthly disability benefit for a partial period of time.

If you’re still partially disabled after that period of time ends, you may be eligible for extended partial disability coverage. If you were previously receiving the full monthly benefit, this could reduce it to be proportional to your loss of income and so on.

Partial disability vs. residual disability coverage

Some insurers use another name for partial disability to mean the same thing: residual disability coverage.

Others consider partial disability and residual disability to be different types of coverage. In that case, residual disability may refer to the partial loss of income and so on but not necessarily to a specific time frame, and for which you can only receive benefits proportional to the loss.

To make matters even more complicated, some insurers offer short-term residual disability coverage that is pegged to a specific time frame but also prorates your benefits to the percentage of lost income and so on.

How disability insurance can help your recovery

Your insurer may cover the costs of your rehabilitation to help you recover from your disability. Such expenses include training and care expenses as well as for modifications to your home, vehicle, or workplace. The sooner you can go back to work and start earning your income again, the sooner you no longer need to rely on disability insurance benefits.

Other insurers offer retraining benefits, which may pay for the cost of going back to school to brush up on your training if you’ve been disabled for a long time. Retraining benefits cover expenses like tuition, books, and equipment, and can be used for vocational and business school.

Disability insurance may even cover you after you’ve recovered from your disability. Like partial disability coverage, a small amount of recovery benefits may be paid for a period of time if your disability causes you to lose a percentage of your income.

Disability insurance coverage for pregnancy

Your insurer should cover complications resulting from pregnancy and childbirth. Sometimes, this could mean conditions that don’t show up until weeks or even months after you give birth.

However, you may not be able to receive coverage for a normal pregnancy, even if you miss work during your pregnancy or for maternity leave. Others that do offer coverage for normal pregnancy require that you have an elimination period and benefits period of 90 days or longer.

Takeaway

Disability insurance is meant to replace your income when you become disabled.

Disability insurance coverage for mental illness

Certain types of pre-existing conditions may be excluded from coverage. Some insurers include mental illness among these exclusions, including anxiety, depression, and other types of nervous disorders.

Some insurers also offer coverage for disabilities caused by alcohol and drug abuse, but coverage may be limited. If you abused these substances prior to taking out the policy, they may be excluded from coverage.

If your mental illness is not excluded, or if it developed after taking out the policy, you may be able to receive disability benefits if it causes you to lose your ability to earn an income. However, ask your disability insurer how long you can receive benefits. Some insurers only cover mental illness for a set period of time that may be much less than your benefits period, after which disability benefits will stop.

Your policy’s benefits for loved ones

Survivor benefits

If you die while receiving disability insurance benefits, your insurer may pay a number of months’ worth of your usual monthly benefit, similar to life insurance. Check your disability insurance policy for information on how to name a beneficiary.

Even if you have this benefit, you may still need an actual life insurance policy. Coverage from life insurance is far higher than that offered by disability insurance survivor benefits, often ranging from a few hundred thousand dollars to millions of dollars.

Compassionate disability

Compassionate disability benefits are paid to you if someone you care for becomes so disabled that you have to take time off work to care for him or her. You do not have to be disabled to claim compassionate disability coverage, but you do need to show that you’re working fewer hours and have thus lost a certain percentage of your income.

What’s not covered by disability insurance

Before you even apply for disability insurance coverage, you should know that certain conditions will make it difficult or impossible for your application to be approved. Among them are serious illnesses, like cancer or a history of heart attacks.

If you do get approved despite having a pre-existing condition, that condition may be listed as an exclusion in your policy. That means your disability insurance doesn’t cover it; if you become disabled due to the condition, you won’t be eligible to receive benefits.

Other types of situations that aren’t covered don’t involve your health. Disability caused by any of the following situations is generally not covered:

Fighting in a war.

Committing a crime, participating in a riot, or during incarceration.

Self-inflicted and intentional injury.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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